Commodities | Jul 26 2012
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By Jonathan Barratt
[Editor's note: Since this note was written gold has rallied to US$1603/oz and silver to US$27.40/oz.]
Gold had a reasonable bounce on Tuesday night with a low at
US1564 having helped to clear out any weak long positions. It is interesting to see that we have not had much movement in the price action. We echoed this sentiment last week and it remains the same so far this week.
What is interesting at the moment is that gold is holding up in the face of a strong USD and weak equity prices. Traditionally, gold trades adversely to movements in the USD and in recent times moved in sync with equity markets. So it is becoming a little bit of a puzzle as to what is happening in this market.
Essentially, we feel that as investors turn to risk aversion trades they are viewing gold as being part of this trade. Buy bonds and buy the USD has been the mantra on those looking to cover risk; it looks like gold is becoming part of this mantra.
We continue to be positive the complex.
Chart point:
We can only reiterate our technical sentiment from last week as little has changed. We continue to like the look of the gold chart, as overall it feels as if it is consolidating before an ultimate push higher. We have a bullish flag, within a bullish flag, which potentially is very bullish. We need to wait for a break through US1600 to confirm. Good support comes in at US1550, which is very critical to the current bullish pattern. If going long then stops can be placed at US1545. Our momentum indicators are currently bullish. Silver looks a little more explosive as we have a triple low in place and with momentum indicators looking positive suggest the move higher is just around the corner. The trigger for the move higher is US28.50 with an intermediate target of US35.00.
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Silver
Produced by Jonathan Barratt direct from the trading desks of Commodity Broking Services, Barratt's Bulletin provides expert analysis of commodity markets, global indices and foreign exchange movements. Click here to take a no obligation 21-day trial to Barratt's or to learn more visit www.barrattsbulletin.com. Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).
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